Adobe 2014 Annual Report Download - page 56

56
Contractual Obligations
The following table summarizes our contractual obligations as of November 28, 2014 (in millions):
Payment Due by Period
Total Less than
1 year 1-3 years 3-5 years More than 5 years
Notes......................................................................... $ 1,744.9 $ 652.5 $ 85.5 $ 85.5 $ 921.4
Operating lease obligations....................................... 202.6 42.6 67.4 46.8 45.8
Capital lease obligations ........................................... 3.3 3.3 — — —
Purchase obligations ................................................. 288.9 227.9 42.2 18.8 —
Total ........................................................................ $ 2,239.7 $ 926.3 $ 195.1 $ 151.1 $ 967.2
Senior Notes
In February 2010, we issued $600.0 million of 3.25% senior notes due February 1, 2015 and $900.0 million of 4.75% senior
notes due February 1, 2020. Interest on our senior notes is payable semi-annually, in arrears on February 1 and August 1. At
November 28, 2014, our maximum commitment for interest payments under the senior notes was $244.9 million for the remaining
duration of our senior notes. In June of fiscal 2014, we entered into interest rate swaps that effectively converted the fixed interest
rate on our 2020 Notes to a floating interest rate based on the London Interbank Offered Rate (“LIBOR”) plus a fixed number of
basis points through February 1, 2020.
Capital Lease Obligation
In January 2013, we entered into a sale-leaseback agreement to sell equipment totaling $25.7 million and leaseback the
same equipment over a period of 24 months. This transaction was classified as a capital lease obligation and was recorded at fair
value.
Covenants
Our credit facility contains a financial covenant requiring us not to exceed a maximum leverage ratio. Our Almaden Tower
lease includes certain financial ratios as defined in the lease agreements that are reported to the lessors quarterly. As of November 28,
2014, we were in compliance with all of our covenants. We believe these covenants will not impact our credit or cash in the coming
fiscal year or restrict our ability to execute our business plan. Our senior notes do not contain any financial covenants.
Under the terms of our credit agreement and lease agreements, we are not prohibited from paying cash dividends unless
payment would trigger an event of default or one currently exists. We do not anticipate paying any cash dividends in the foreseeable
future.
Accounting for Uncertainty in Income Taxes
The gross liability for unrecognized tax benefits at November 28, 2014 was $148.8 million, exclusive of interest and
penalties.
The timing of the resolution of income tax examinations is highly uncertain as are the amounts and timing of tax payments
that are part of any audit settlement process. These events could cause large fluctuations in the balance sheet classification of
current and non-current assets and liabilities. We believe that within the next 12 months, it is reasonably possible that either certain
audits will conclude or statutes of limitations on certain income tax examination periods will expire, or both. Given the uncertainties
described above, we can only determine a range of estimated potential decreases in underlying unrecognized tax benefits ranging
from $0 to approximately $5 million.
Royalties
We have certain royalty commitments associated with the shipment and licensing of certain products. Royalty expense is
generally based on a dollar amount per unit shipped or a percentage of the underlying revenue.
Indemnifications
In the normal course of business, we provide indemnifications of varying scope to customers against claims of intellectual
property infringement made by third parties arising from the use of our products and from time to time, we are subject to claims
by our customers under these indemnification provisions. Historically, costs related to these indemnification provisions have not